The Advantages and Disadvantages of Leasing

Many people are still in the dark when it comes to car leases. Ask anyone about their thoughts on car leasing and you will get comments such as, “I want to OWN my car,” and “I drive too many miles to lease.”

The fact of the matter is these statements show ignorance for most car shoppers.

Unless you are a cash buyer, the bank or credit union owns your new car – at least until you pay it off. And if you trade every three or four years like most, you never really own your car.

But what about driving too many miles? Unless you are the kind who literally drives the wheels off your car, the amount of miles you drive is not pertinent to your method of finance. If you drive a lot of miles, you are going to pay for it at lease end or when you trade.

What if you are one of the few cash buyers out there? You probably do it for convenience, or use it as a means to create the best deal possible in the shortest amount of time. But with interest rates being so low, why would you pay cash for an asset that depreciates as rapidly as a new car?

Regardless of the above however, you should take a good look at the pros and cons of leasing the next time you are in the market for a new car.

What are the advantages of a car lease?

  1. Leasing generally means lower monthly payments: With a lease, you only pay for depreciation during the term and you should note that monthly payments are typically 40%-50% lower than new car loans.
  2. Leasing can get you more car for your money because you are dealing with lower payments and you can expect to drive a new car every three to four years if you lease rather than buy.
  3. There are fewer problems caused by maintenance issues when you lease. Most major repairs are covered by the warranty of the vehicle when you lease (you can check your lease term against the warranty to be sure this is the case).
  4. You have to pay less cash up front to secure your car. Leases typically require little or even no money down.
  5. You can walk away from the car at the end of the lease and the closing of a lease is rarely a hassle.
  6. GAP protection included. Most leases include Guaranteed Asset Protection at no additional charge. For example, if you total your car, your insurance company will cover only the fair market value for your car rather than what you owe. GAP protection covers the balance.

What are the disadvantages of a car lease?

  1. Leasing is hard to get for those with poor credit. These days, if you do not have a credit score in excess of 650, it can be hard to obtain lease financing.
  2. You generally have to pay a fee to secure the lease. Typically, this is called the Acquisition Fee.
  3. It is important to watch out for confusing finance charges pertaining to the lease agreement since dealers can include miscellaneous fees without dramatically raising your payment.
  4. Potentially higher insurance premiums. Many leasing companies often require higher limits than traditional retail finance contracts.
  5. Early termination penalties. It can be costly to terminate your lease early. However, options such as and make it easier to get out of your lease early.

When you’re looking for a new car, it’s important to make a determination about leasing vs. buying.  In any case, when you are ready to lease or buy, you can improve your chances of walking away with the best deal by taking advantage of

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